Sunday, January 11, 2015

CARGO CULTISM AND THE INVISIBLE HAND

“I hope someone will make moves in that direction, if the invisible hand of the market doesn’t change the area’s trajectory naturally as the economy continues its resurgence. Less than five miles from downtown Durham and about seven miles from downtown Chapel Hill, on a busy gateway corridor to Durham, it could be a vibrant gem.

I’ll be watching, professionally and personally. Familiar dining haunts will bring me back to this area, I’m sure – and my commute between home and our new offices will take me through it daily. I expect to keep using the same familiar cleaners, barber shop, shoe-repair shop, pharmacy and so on.”

Comment

Bob will wait a longtime for “an invisible hand” initiating a move in the market. There is no such entity. It doesn’t exist. Its a metaphor not a reality. Markets work through visible prices and the motivations of real living human actors.

Unfortunately, other human actors trying to theorise about how markets work, misread one paragraph in Adam Smith’s Theory of Moral Sentiments (1759, TMS)and one paragraph in his Wealth Of Nations (WN, 1776) and confused his use of a metaphor with a real entity and declared that he meant a real, tangible entity rather than a metaphor. Now the people who started this myth off were not always clear on the role of metaphors.

Educated graduate journalists, like Bob, are expected to be proficient in the English language and its rules (grammar). They also used to be legendary sticklers for fact-checking. Bob instread has gone with the crowd who believe that which they have heard most economists who speak of the invisible-hand” stand in awe. This awe is not informed from their reading of Adam Smith; like most economsts, they simply repeat what they were taught, and moreover they have not read Adam Smith on Rhetoric in which he defined metaphors as “describing in a more striking and interesting manner” that to which they refer.

In Smith’s case his use of the inviisble hand’ metaphor referred to the hidden motives of individuals that leads them to undertake actions for an intentional consequence. Moreover, their intended consequence could also have unintended consequences. This is explained in Smith’s “Lectures in Rhetoric and Belles Lettres” (LRBL, 1762) and he demonstrated this in his three only uses of the “invisible-hand”. Smith delivered his Rhetoric lectures continuously throughout his teaching career (1748-1764).

Only if an individual entrepreneur decides to a course of action to realise an intended consequence of a profitable opportunity in or near the run-down area will that consequence potentially materialise. Using Smith’s metaphor, it describes him or her motivated actions. Smith did not say or imply an actual third-party invisible hand materially intervened as today’s epigones claim; he used the IH metaphorically to describe a motive-action-sequence. That’s all. But since Paul Samuelson’s misreading (1948), the process has been fossilised into “selfishness” being transmuted into generating a “public good”, and later, into an active and actual ‘invisible hand’ guiding market economies! What this version of the IH metaphor means varies from a ‘mystical’ (or miralculous) force or entity right through to the invisible ’Hand of God’!

Evidence of human behaviour since the distant past, as well as abundantly confirmed today and also detailed in Smith’s written Works, show innumerable examples of human actions that do not serve any definition of causing “public good”. A few examples from Wealth Of Nations reveal evidence of the ‘public bads’ associated with mercantile political economy, traiffs, prohibitions, ‘jealiousy of trade’ (and resultant wars). More recent examples of pollution, enviromental destruction, over-fishing, ‘tragedy of the commons’ cases, exhaustion of the land and decline of water resources, and many more.

So Bob Ashley intends well and hopes positively but like the old ‘Cargo Cults’ of New Guinea in the past he likely will be disappointed while waiting for a metaphor to do something.